Houston's housing market sees strongest demand in mid-priced homes

A for sale sign is displayed outside a home along Ashland St. Wednesday, July 12, 2017 in Houston.

Photo: Melissa Phillip

Houston’s home sales rose for the seventh consecutive month as strong sales of mid-priced homes offset declines in high-end properties and propelled the market to its best September on record.

Single-family home sales jumped nearly 10 percent from a year earlier, surpassing 7,000 for the first time in September, the Houston Association of Realtors reported Wednesday. September sales were up in all but the highest and lowest price points. The bulk of sales were among single-family homes that sold for between $150,000 and $500,000.

Buyers were driven by low mortgage rates rates that last week averaged 3.65 percent on a 30-year, fixed-rate loan, down more than a percentage point from last year, according to Freddie Mac, the government sponsored mortgage company.The median sales price of a single-family home last month rose 4.7 percent from a year earlier to $244,000, according to the Realtors’ association.

“Certainly lower interest rates help,” said Mark Woodroof, managing partner of Better Homes and Gardens Real Estate Gary Greene. “but I think it’s more of an ongoing good narrative for the city of Houston in terms of optimism in the economy.”

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But real estate agents and economists cautioned that the outlook for the economy and the real estate market are uncertain. Oil prices are down, trading around $52 a barrel, and job growth has begun to slow. Oilfield service jobs, for example, peaked in May and have declined steadily since, according data from Greater Houston Partnership.

“Yes, the economy is slowing and job growth is probably overstated,” said Patrick Jankowski, senior vice president of research for the Greater Houston Partnership, “but we’re still going to have a good year. The issue is what will 2020 look like? If the U.S. economy slows down, the Houston economy will slow down.”

Inventories of homes remain tight. The stockpile of properties for sale edged up to 4.1 months, meaning it would take that long to sell all of the homes on the market based on recent activity. Six months is considered to be a balanced market where neither buyer nor seller have the upper hand in sales negotiations.

Influx of investors

The tightest supplies were among lower priced homes. Properties priced between $150,000 and $200,000 had just a 2.2-month supply in September. Homes in that price range sold in an average of 36 days last month, the fastest among all price categories.

“Anything in the $250,000 and under range, wherever it is, is highly attractive,” Woodroof said.

Demand for such homes has grown amid an influx of investors. Companies and individuals are buying homes to fix and flip or turn into rentals.So-called ibuyers that buy directly from homeowners have also come into the market.

But if the market slows and investors can’t rent or resell their homes, it could dump more properties on the market and drive down values.

“I know real estate brokers are making wonderful commissions,” Jankowski said, “but I’m concerned about the composition of these sales.”

Sales and prices have risen in the suburbs of League City, The Woodlands and the Champions area. Popular urban neighborhoods continue to post gains, as well.

Rentals jump

Throughout Greater Heights, the average single-family sales price was $601,700 over the past year, up 5 percent from the year earlier. The average sales price east of T.C. Jester in Oak Forest, a neighborhood popular with buyers priced out of the Heights, was up 6 percent over last year to $541,297.

Even as low mortgage rates have made it advantageous to buy, single-family rentals were highly sought after, too, in September. The market saw a 6.9 percent boost in homes leased last month with an average rent of $1,838, up 1.5 percent from last year.

Nancy Sarnoff covers commercial and residential real estate for the Houston Chronicle and the paper’s two websites: Chron.com and HoustonChronicle.com. She also hosts Looped In, a weekly real estate podcast about the city’s most compelling people and places. Nancy is a native of Chicago but has spent most of her life in Texas.